Property/casualty and life insurers are key players in the capital markets, with $5.8 trillion in cash and invested assets in 2017, according to S&P Global Market Intelligence. Total property/casualty insurers’ cash and invested assets were $1.7 trillion in 2017, and life cash and invested assets totaled $4.1 trillion in 2017.
Property/casualty and life insurer investments differ according to their payout needs. Property/casualty insurers invest largely in high-quality liquid securities which can be sold quickly to pay claims resulting from a major hurricane, earthquake or man-made disaster such as a terrorist attack. This sector includes homeowners and auto insurance, where policies are in force for six months to a year, at most. In 2017 property/casualty insurers invested 25 percent of their assets in stocks, a highly liquid investment, and 58 percent in bonds. Life insurers’ benefit payments are more predictable, because life insurance policies and annuity contracts are much longer-term products, and generally are in force for ten years or longer. Life insurers invest more heavily in longer-term products. In 2017, life insurers invested 73 percent of their assets in bonds, compared with 58 percent for property/casualty insurers, and 3 percent in corporate stocks, compared with 25 percent for property/casualty insurers. In addition, life insurers invested 12 percent of their assets in mortgage loans on real estate, investments that may take seven years or longer to mature, compared with property/casualty insurers, who invested only 1 percent of their assets in this sector.
Insurance companies invest the premiums they collect in state and local municipal bonds, helping to fund the building of roads, schools and other public projects. They provide businesses with capital for research, expansions and other ventures through their investments in corporate equities and bonds.